Here's very interesting commentary in light of the Republic presser just out. Granted Australia is a different dynamic, but it won't be beer and skittles either, regardless of the choice of airframe:
Aviation Week Nov 2011
Many regional carriers are having a difficult time with 50-seat aircraft, which have become unsuitable for many markets because of high fuel costs and the limited number of seats over which to spread the higher costs, but Republic appears to be the first to have reached the breaking point.
“It's difficult to see how we can continue to operate these aircraft for our major airline partners unless we significantly reduce the operating costs,” says Bryan Bedford, Republic's CEO.
Bedford has blamed some of the problem on escalating maintenance costs, above-market lease rates and uneconomical fixed-fee reimbursement rates. But there also is something else at work, he says: Fixed-fee flying for major airlines is not producing the historical level of returns because automatic rate increases in those fixed-fee contracts are tied to the Consumer Price Index, which has not risen much in recent years—certainly not enough to keep pace with regional airline costs for labor, health care and maintenance.
That makes 50-seater economics even more difficult to overcome, he says. Concurrently, major airline downsizing of their “marginal hubs” has lessened demand for the aircraft. For Republic, even cutting its 50-seat aircraft fleet by nearly half since the end of 2007 has not been enough. Nor is having 11 of the ERJ 145s subleased offshore, as was the case as of Sept. 30.
The tough question is: What can Republic do about it? Republic says it plans to negotiate lower costs with stakeholders, but there is a problem. Not only does Chautauqua own 22 of its ERJ 145s, but 22 of them are leased from General Electric Capital Aviation Services (Gecas). Gecas also is leasing six ERJ 145s to Aeromexico, seven to SkyWest subsidiary ExpressJet and six to Trans States Airlines in the U.S., and nine to Passaredo Transportes Aereos in Brazil. If Gecas lowers lease rates for Republic in mid-contract, you can bet other carriers also will be knocking at its door. That might limit the leasing company's desire to cut a deal.
Other regionals will be paying attention, especially since 50-seat aircraft still accounted for nearly half the U.S. regional airline fleet as of July, and the fuel prices that have made many routes uneconomical for them are not likely to fall. As reported in Aviation Week in May, over the rest of this decade more than 70% of those 50-seaters will reach the end of their capacity purchase contracts.
Earlier this year, SkyWest Airlines COO Chip Childs told me the widely predicted demise of the 50-seater has been overstated because operators will be able to negotiate new, lower-cost rates when their current leases expire. Republic's attempt to do so even earlier could provide an early indication of what is really possible.